Category: Stock Market

The AMP Ltd (ASX: AMP) share price is on watch this morning after AMP Capital Wholesale Office Fund (AWOF) investors voted to appoint Mirvac Group (ASX: MGR) as trustee.

Losing control of the fund also puts focus on the sale of AMP’s real estate and domestic infrastructure business to Dexus Property Group (ASX: DXS).

The AMP share price was $1.02 at Monday’s market close.

Let’s take a closer look at today’s news from the embattled ASX financial services company.

AMP loses control of AWOF to Mirvac

The AMP share price could be one to watch on Tuesday after the company lost control of a $7.7 billion office fund to fellow S&P/ASX 200 Index (ASX: XJO) constituent, Mirvac.

AWOF is made up of 11 assets concentrated in the Sydney and Melbourne markets. Among its holdings are Sydney’s Quay Quarter Tower and Melbourne’s Collins Place.  

But losing Monday’s vote for control of the fund – as well as a separate $3 billion investment mandate – sees AMP foregoing more than a handful of prestigious assets.

The maximum earnout payable under the sale of Collimate Capital’s domestic leg to Dexus has fallen to around $75 million on today’s news.

The highest price Dexus will pay for the business is now just $325 million, including a $250 upfront cash payment.

Though, AMP previously noted it didn’t expect to receive most of what was a potential $300 million earnout fee.

Mirvac is set to take control of AWOF in mid-October. The property group’s capital under management will surge around 76% to approximately $18.1 billion on the back of the win.

However, the required majority of the fund’s investors didn’t vote to effect a liquidity facility. Mirvac plans to put forward amendments to offer $500 million of liquidity within 20 days of taking control.

AMP has been battling to keep control of the office fund since last year. Mirvac reportedly emerged as a contender for AWOF in September.

AMP won a November vote for the fund’s reins before certain AWOF investors called for yesterday’s vote in May.

The post AMP share price in focus as Mirvac wins control of $7.7 billion office fund appeared first on The Motley Fool Australia.

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More reading

• Why interest rates need to rise despite ASX carnage: economist
• Why did the AMP share price fall 13% in FY22?
• What dragged the AMP share price down 13% in June?
• Here are the top 10 ASX shares today
• ASX bank shares look out, AMP has new tech under the hood

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

What happened

It’s been another solid day in the crypto world, with headlines that the aggregate value of all cryptocurrencies has once again passed the $1 trillion threshold, bolstering investor confidence in this sector.

This surge higher has been driven, in large part, by recent moves in Bitcoin (CRYPTO: BTC), Ethereum (CRYPTO: ETH), and Cardano (CRYPTO: ADA). As of 10:15 a.m. ET, these three top-10 tokens were up 4.1%, 9.1%, and 9.4%, respectively.

While Bitcoin’s solid momentum over the past week, fueled by what appears to be renewed bullish sentiment and strong demand for digital currencies, is garnering headlines, it’s Ethereum’s outsize moves higher that have grabbed most investors’ attention. Last Thursday, Ethereum started rising on news that a tentative date of Sept. 19 has been set for “the merge,” which will combine Ethereum’s mainnet and Beacon Chain, creating a proof-of-stake blockchain. Since Thursday morning, Ethereum has surged more than 35% at the time of writing.

Cardano appears to be benefiting from the enthusiasm around Ethereum’s upcoming merge as the former prepares for its Vasil hard fork, which will bring a number of improvements to Cardano’s blockchain. This hard fork had been delayed, similar to Ethereum’s merge, which led to earlier concerns. However, with more optimism than pessimism today, investors appear to be taking a more positive stance on network upgrades to start the week.

So what

The upgrades underway for Ethereum and Cardano are a source of significant uncertainty for investors. There’s always a chance something will go wrong, and value could be destroyed in the process of making improvements. With bearish sentiment prevailing lately, investors appear to increasingly be erring on the side of caution, waiting for concrete evidence everything will be OK before jumping in.

While those on Ethereum’s developer team, including Ethereum founder Tim Beiko (who initially put the Sep. 19 date out there), have made sure to refrain from providing a “hard” date, investors now have a rough timeline for this catalyst. Other positive factors, such as the narrowing of the spread between staked Ether and Ether, suggest investors are providing significant credence to the idea this merge will take place before the end of Q3.

Now what

The next few months are shaping up to be volatile ones for these top crytpo projects. These various upgrades, previously seen as both catalysts and potential sources of uncertainty, are once again being viewed with a positive lens. That means that, right now, Ethereum’s merge and Cardano’s Vasil hard fork are the bullish catalysts investors have been hoping for.

That said, whether this momentum can be carried forward remains to be seen. This bear market is a doozy, and overall sentiment in the crypto sector continues to reflect extreme fear. Until that changes, it’s going to be hard for such momentum-driven rallies to hold steady. Accordingly, investors may want to exhibit caution before adding aggressively to these top growth-oriented projects. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Why Bitcoin, Ethereum, and Cardano are rocketing higher today appeared first on The Motley Fool Australia.

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More reading

• No contest: My top crypto to buy now
• Will Bitcoin hit $100,000 in 2024?
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• Will the US Fed continue to influence the Bitcoin price in the 2023 financial year?
• Here’s Bitcoin’s only path to $300,000

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Shares in Flight Centre Travel Group Ltd (ASX: FLT) continued to wobble throughout FY22.

After hitting a 52-week low of $13.67 following the COVID-19 outbreak in Australia, the ASX travel share rebounded strongly.

In fact, its shares rocketed to a post-COVID high of $25.28 on 5 October.

However, this was short-lived as Flight Centre shares erased their strong gains to trade sideways for the remainder of FY22.

Nonetheless, we take a look at what some industry experts think the Flight Centre share price will do in FY23.

What’s in store for Flight Centre shares?

Turning to FY23, Goldman Sachs analysts believe the medium-term view will be largely unchanged for the Flight Centre share price.

The team acknowledged Flight Centre’s positive trading update in which the company reported “very strong activity levels in March 2022”.

However, external factors impacting the current economic climate, such as extreme inflationary movements, could hit the company’s earnings.

Higher airfares would likely drive potential holidaymakers away as the cost of living soars.

Furthermore, the emergence of new COVID-19 strains, increased competition in the corporate segment, and geopolitical tensions may disrupt operations and thus, potential revenue.

Goldman Sachs expects Flight Centre to report total EBITDA of $434.9 million, up 0.3% from previous forecasts.

As such, the broker maintained a neutral rating with a 12-month price target of $20.40 per share.

Based on Monday’s closing price of $17.37, this implies an upside of around 17.5% for investors.

The broker Macquarie has a similar view on Flight Centre shares. Its analysts raised their price target by 16% to $21.95 apiece.

Key upside risks include a faster-than-expected recovery as well as significant market-share gains in the online channel and travel bubble routes.

In the past 12 months, the Flight Centre share price has risen 16.9%, but is down 1.4% year-to-date.

The post Is the Flight Centre share price on a runway to growth in FY23? appeared first on The Motley Fool Australia.

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More reading

• Flight Centre share price leaps as ‘revenge travel’ takes off
• These are the 10 most shorted ASX shares
• Clipped wings: Why ASX 200 travel shares are having trouble getting off the ground today
• Why Aurizon, Bega Cheese, Flight Centre, and Lake Resources shares are sinking
• Own ASX travel shares? Here’s the outlook for FY23

Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs. The Motley Fool Australia has recommended Flight Centre Travel Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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If you’re wanting to boost your income with some dividend shares, then you might want to consider the two listed below.

Here’s what you need to know about these dividend shares:

Accent Group Ltd (ASX: AX1)

The first ASX dividend share for investors to look at is leading footwear retailer, Accent.

Its shares have been sold off this year amid concerns over consumer spending as inflation rears its ugly head. While this is disappointing, the team at Bell Potter appear to believe it could be a buying opportunity.

Last month its analysts retained their buy rating with a $2.20 price target on the company’s shares.

In addition, with the broker forecasting fully franked dividends of 5.8 cents per share in FY 2022 and 10.7 cents per share in FY 2023. Based on the current Accent share price of $1.38, this would mean yields of 4.2% and 7.8%, respectively, over the next couple of years.

Elders Ltd (ASX: ELD)

Another ASX dividend share to look at is Elders. It is an agribusiness company that provides a range of services to rural and regional customers across the Australia/New Zealand region.

Elders has been a very strong performer this year. For example, during the first half of FY 2022, the company reported an 80% increase in first-half EBIT to $132.8 million last week.

This went down well with the team at Goldman Sachs. In response, the broker put a buy rating and $21.00 price target on its shares. It likes Elders due to its “strong track record; good industry structure; potential for positive earnings surprise; and an attractive valuation.”

As for dividends, Goldman is forecasting dividends per share of 50 cents in FY 2022 and 53 cents in FY 2023. Based on the current Elders share price of $11.99, this implies attractive yields of 4.2% and 4.4%, respectively.

The post Analysts name 2 ASX dividend shares to buy with 4%+ yields appeared first on The Motley Fool Australia.

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• Why analysts say these excellent ASX dividend shares are buys
• ASX 200 supermarket shares lead as household spending jumps
• 2 top ASX dividend shares that analysts rate as buys
• How much has the Accent dividend paid to shareholders in the last 5 years?
• Experts say these ASX dividend shares are buys this month

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Accent Group and Elders Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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What a month it has been for the South32 Ltd (ASX: S32) share price.

After touching a recent high of $5.18 on 8 June, shares in the diversified mining and metals company tanked to a year-to-date low of $3.40 last Friday.

To put that into perspective, this represents a fall of 35% in just over five weeks.

South32 shares finished at $3.48 at yesterday’s market close.

We take a look at what the brokers think of the South32 share price now.

What’s ahead for South32 shares?

Despite suffering short-term volatility, the South32 share price could be in for a strong recovery according to Goldman Sachs.

The broker noted that the share is trading at 2.4 times FY23 EBITDA with a robust free cash flow (FCF) outlook.

This is being driven mostly by exposure to base metal price momentum as well as 10% copper equivalent production growth.

With increased capital returns, Goldman Sachs assumes South32’s buyback will continue to be extended at roughly US$200 million per annum.

Revenue in FY23 is expected to top US$11.39 billion, up from the US$9.87 billion estimate.

Furthermore, underlying EBITDA is projected to come in at US$4.53 billion, an increase from the US$4.45 billion anticipated for FY22.

Subsequently, Goldman Sachs has a buy rating on South32 shares and a 12-month price target of $5.

This implies an upside of roughly 43% on the current share price.

Morgans is even more bullish on South32 shares.

As reported by my Fool colleague, James, the broker is satisfied with the way the miner has transformed its diverse portfolio.

As such, Morgans has an add rating and a $6.10 price target on South32 shares.

South32 share price snapshot

Since the beginning of March, South32 has tumbled on the back of investors’ recession fears.

Nonetheless, its shares are up 17% over the past 12 months, but down 13% year-to-date.

South32 commands a market capitalisation of approximately $16.1 billion.

The post Can the South32 share price bounce back in FY23? appeared first on The Motley Fool Australia.

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More reading

• I think these 2 ASX 200 dividend shares are buys for income
• Here are the 3 most heavily traded ASX 200 shares on Friday
• Here are the 3 most heavily traded ASX 200 shares on Thursday
• These ASX 200 mining shares are bolstering the market today
• Why experts have named these ASX 200 dividend shares to buy

Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The BHP Group Ltd (ASX: BHP) share price will be on watch this morning.

This follows the release of the mining giant’s fourth-quarter and full-year production update.

BHP share price on watch after achieving guidance

The good news for the BHP share price today is that the Big Australian finished the year positively and achieved the majority of its guidance.

BHP’s iron ore production rose 8% quarter on quarter to 64.2Mt, bringing its full year production to 253.2Mt. This was flat on the prior corresponding period and in line with its guidance range of 249Mt to 259Mt.

The strong finish to the year was driven by higher volumes at WAIO, reflecting record production from the Mining Area C hub and the continued ramp up of South Flank and improved supply chain performance. Pleasingly, management expects to achieve its cost guidance for WAIO.

Things were even better during the quarter for BHP’s copper operations. Production rose 25% quarter on quarter to 461.8kt. This led to full year production of 1,573.5kt. While this was down 4% year on year it was in line with its guidance of 1,570kt to 1,620kt.

Management advised that this was driven by higher volumes at Escondida due to increased grade and concentrator throughput, higher volumes at Spence thanks to improved leaching performance, and a rebound at Olympic Dam following major smelter maintenance. Escondida cost guidance is expected to be achieved for the 12 months.

Elsewhere, full year metallurgical and energy coal production were in line with guidance at 29.1Mt and 13.7Mt, respectively.

Finally, one small disappointment was that BHP’s nickel production of 76.8kt missed guidance due to an unplanned smelter outage.

Management commentary

BHP’s chief executive officer, Mike Henry, was pleased with the quarter. He said:

BHP produced a strong fourth quarter to cap off a year of significant progress. Our performance for the year has been underpinned by safe, reliable operations and firm demand for our commodities.

We delivered record full-year sales volumes at our iron ore business in Western Australia as a result of reliable operational performance and the South Flank project which continued to ramp up. In copper, Escondida in Chile had record material mined and near-record concentrator throughput, while Olympic Dam in South Australia performed strongly in the fourth quarter after planned smelter maintenance.

Henry appears cautiously optimistic on the year ahead. He commented:

Broader market volatility continues and we expect the lag effect of inflationary pressures to continue through the 2023 financial year, along with labour market tightness and supply chain constraints. Over the year ahead, China is expected to contribute positively to growth as stimulus policies take effect, however, the continuing conflict in the Ukraine, the unfolding energy crisis in Europe and policy tightening globally is expected to result in an overall slowing of global growth.

Our strong focus on safety, operational reliability, cost control and social value will help us navigate these challenges and continue to deliver for all of our stakeholders.

FY 2023 guidance

BHP has provided investors with its production guidance for FY 2023.

This includes copper production of 1,635-1825kt, representing growth of 4% to 16% year on year, and largely flat iron ore production of 249Mt to 260Mt.

The post BHP share price on watch after ‘strong fourth quarter’ appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Tuesday
• Here are the 3 most heavily traded ASX 200 shares on Friday
• Why BHP, Jumbo, Pendal, and Rio Tinto shares are sinking today
• These ASX 200 mining shares are getting buried. What’s happening?
• ASX 200 midday update: Rio Tinto’s update, BHP and Fortescue sink, AVZ remains suspended

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Regular readers will already know that macroeconomics are dominating discussions about ASX shares at the moment.

Long-term company outlook has been put aside while the market is, rightly or wrongly, focused on inflation, rising interest rates, the war in Ukraine and a potential recession.

But if you can turn down the noise, there are some bargains out there.

That’s because all those world events will sooner or later pass, and businesses with a positive outlook will likely win in the long run.

Taking this mindset, the team at the Firetrail Absolute Return Fund recently revealed two ASX shares they’ve bought — while explaining why you need not worry about the macro headwinds that forced their prices down this year:

Reforms are painful in the short-term but great in the long run

Network-as-a-service provider Megaport Ltd (ASX: MP1) has seen its share price just devastated this year.

In fact, in mid-November last year, it was touching $22, and now it trades in the high $6s. That’s an almost 70% drop in eight months.

The Firetrail team told clients that Megaport has been caught up in the violent sell-off of technology shares and did have a quarterly update earlier this year that missed expectations.

But it is undergoing a structural change, so there is nothing to worry about in the long run.

“Megaport has recently moved its sales model to third party distribution via some of the world’s largest B2B technology businesses such as Cisco Systems Inc (NASDAQ: CSCO),” read the Firetrail memo.

“Previously, all Megaport sales were done by their internal sales team.”

Firetrail analysts explained how there was “significant value” in this change over the medium to long term.

“However, it has resulted in some short-term disruption, at a time where any growth company that misses expectations has been sold off materially,” the memo read.

“The fund has added capital to the Megaport position on the back of the share price weakness and our conviction in the medium-term outlook for the company.”

Why this time it’s different for James Hardie

The share price for construction materials provider James Hardie Industries plc (ASX: JHX) has also had a shocking 2022.

The stock has lost a painful 40.7% since the start of the year.

The Firetrail team attributed this loss of confidence to rising interest rates, which kills demand for home loans.

“As a result, less houses are built, and there is less demand for related goods such as building materials, building products, fixtures and fittings,” the memo read.

“The added possibility of recession will further deepen any downturn.”

However, the analysts noted that the US housing market, where James Hardie makes much of its revenue, was very different to the last downturn during the global financial crisis (GFC).

There has been a chronic underbuild of new homes since the scarring of the GFC, a COVID-induced backlog of construction, and new housing stock remains at just three months of supply.

But most important to James Hardie is the deterioration of existing housing.

“The median age of a house in the US has increased from 32 years old pre-GFC to over 40 years old today.”

This means that, notwithstanding any housing construction slowdown, James Hardie products will enjoy elevated demand from renovations.

“Repair and renovations spending has historically been less volatile and less cyclical than new housing construction.”

So there is a disjoint between market perceptions and business reality.

“Fortunately for James Hardie, about 65% to 70% of its revenue comes from repair and renovations activity,” read the Firetrail memo.

“However, James Hardie’s stock price trades very closely with new home builders in the US.” 

For the Firetrail team, this presents a golden opportunity for the patient investor.

“The material product mix and margin opportunity on offer for James Hardie gives us further confidence in the earnings profile, suggesting the current market dislocation and de-rating presents a compelling opportunity over the medium term.”

The post 2 ASX shares we just bought that everyone’s underestimating: fund appeared first on The Motley Fool Australia.

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More reading

• ASX 200 midday update: ANZ to buy Suncorp Bank for $5bn, Whitehaven Coal’s update
• Chicken and chips: Experts name 3 ASX shares to buy right now
• Brokers name 3 ASX shares to buy today
• Broker names 2 ASX tech shares to buy in July
• Why Block, Megaport, Navigator Global, and Whitehaven Coal shares are rising

Motley Fool contributor Tony Yoo has positions in MEGAPORT FPO. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Cisco Systems and MEGAPORT FPO. The Motley Fool Australia has recommended MEGAPORT FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Ask A Fund Manager

The Motley Fool chats with the best in the industry so that you can get an insight into how the professionals think. In this edition, Cyan Investment Management portfolio manager Dean Fergie shares his thoughts on the small-cap market.

Investment style

The Motley Fool: How would you describe your fund to a potential client?

Dean Fergie: We’re a small-cap Aussie equity fund. We have a very small amount of pre-IPO in there as well, but we’re looking for what we see as undiscovered gems in the market — industrial businesses that have long-term growth prospects and we think will grow significantly faster than the overall market over the medium to longer term, being three-plus years.

MF: The market’s changed dramatically since the last time we spoke. It’s been a tough time for small caps recently, hasn’t it?

DF: Incredibly difficult, yes. 

Maybe not as challenging as the GFC, but getting up there in terms of the sentiment and the movement in share prices. There’s a lot of stocks that are off 90% or more. So there’s been a lot of money lost on paper in the past six to 12 months, for sure.

MF: Have you had nervous clients having a chat to you? Have you had to convince people to stay invested for the long term?

DF: That’s a good question. I would say 5% to 10% of investors are really nervous and worried, the fact that their investments are going down. Most, I think, appreciate that there’s volatility if you’re invested in equities and you’ve got to look at it over the long term. 

There’s obviously a handful that see a decrease in share prices as an opportunity and are buying more in. And there’s a lot of investors who just go, “You know what? It’s a long-term investment. I’m going to park it there and pull it out in five to 10 years. And I expect it’ll be more than when I invested.” I think that’s probably the right strategy.

MF: How do you see the state of play for ASX shares at the moment, and where do you see it going?

DF: The sentiment is almost as poor as it could be. Everyone’s worried about so many just different aspects of the economy. Coming into June 30, there was a lot of tax-loss selling. So there’s negative momentum. People are worried about interest rates, property prices, consumer behaviour, and the like. 

For me, when there’s overwhelming negative news, that’s usually a good time to buy. I think interest rates have gone up pretty substantially, but they’re still at historically very low levels. So I don’t see that as being as much of a risk as most investors see it.

So I’m actually pretty optimistic. I’ve been around for a long time, and I know that the market has pretty big swings. 

From what I’ve seen, because I’m not seeing underlying pessimism from the companies to which I’m speaking to, that gives me confidence that the underlying fundamentals are still intact. And that spells an opportunity in depressed share prices to make some good buys.

The post Why this is the best time to buy small-cap ASX shares: fund manager appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Tuesday
• 6 ways to protect your ASX shares against recession
• Here are 2 ASX dividend shares that brokers rate as buys
• Why did the BrainChip Holdings share price leap 14% on Monday?
• Broker names 2 ASX growth shares to buy now

Motley Fool contributor Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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On Monday, the S&P/ASX 200 Index (ASX: XJO) started the week with a very strong gain. The benchmark index rose 1.2% to 6,687.1 points.

Will the market be able to build on this on Tuesday? Here are five things to watch:

ASX 200 expected to fall

The Australian share market is expected to open the day lower on Tuesday following a poor start to the week on Wall Street. According to the latest SPI futures, the ASX 200 is poised to open the day 26 points or 0.4% lower. On Wall Street the Dow Jones dropped 0.7%, the S&P 500 fell 0.85%, and the NASDAQ tumbled 0.8%. A late selloff wiped out some strong intraday gains.

ANZ rated neutral

Australia and New Zealand Banking Group Ltd (ASX: ANZ) shares remain neutral rated at Goldman Sachs following its agreement to acquire the banking operations of Suncorp Group Ltd (ASX: SUN). However, with a price target of $27.44, Goldman sees significant upside for ANZ’s shares. It commented: “While the deal somewhat improves ANZ’s lack of scale in domestic retail/commercial banking, we see operational risk as elevated.”

Oil prices jump

It could be a very good day for energy producers such as Beach Energy Ltd (ASX: BPT) and Santos Ltd (ASX: STO) after oil prices jumped overnight. According to Bloomberg, the WTI crude oil price is up 4.7% to US$102.17 a barrel and the Brent crude oil price has risen 4.45% to US$105.68 a barrel. Concerns about Russia’s gas supply to Europe boosted prices.

BHP’s Q4 update

The BHP Group Ltd (ASX: BHP) share price will be one to watch on Tuesday when the mining giant releases its fourth quarter update. The Big Australian is guiding to full-year production of 249Mt to 259Mt for iron ore, 1,570kt to 1,620kt for copper, and 38Mt to 41Mt for metallurgical coal.

Gold price rises

Gold miners Evolution Mining Ltd (ASX: EVN) and Regis Resources Limited (ASX: RRL) will be on watch after the gold price edged higher overnight. According to CNBC, the spot gold price is up 0.2% to US$1,706.7 an ounce. A softer US dollar gave the precious metal a lift.

The post 5 things to watch on the ASX 200 on Tuesday appeared first on The Motley Fool Australia.

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More reading

• ‘Not bricks and mortar’: The real value in ANZ acquiring Suncorp’s banking operations
• Flight Centre share price leaps as ‘revenge travel’ takes off
• Here are the top 10 ASX shares today
• ‘Really strong case’: Can ANZ win over the new ACCC boss?
• Why a Suncorp buyout could mean more green funding for Queensland

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Inflation is at levels not seen in decades, interest rates are steeply rising to combat it, and the war in Ukraine continues to take a tremendous human and economic toll.

It’s no wonder there is considerable fear about a recession.

Fidelity International investment director Tom Stevenson reminded us only a couple of months ago that US Federal Reserve chair Jerome Powell was talking about engineering a “softish” landing.

“Today that seems almost childishly optimistic,” he posted on Livewire. 

“My strategy colleagues here at Fidelity now believe there is a 60% chance of a hard landing in which central banks push the economy into recession, by accident or by design, in order to rein in dangerously rising inflation expectations.” 

Even if Australia luckily avoids it, the US falling into a recession will leave an indelible mark on Australian investors.

This is because ASX shares generally follow the fortunes of their American counterparts.

So with this in mind, what can you do to protect your portfolio against economic calamity?

Stevenson this week set out a useful checklist for investors to go through:

Buy quality

In troubled times, the simple strategy is to avoid buying shares in speculative companies.

“The companies usually best placed to pull through a recession are those with solid balance sheets, decent profit margins, and strong positions in their markets.”

Steven said added that once it seems like a recession — or the fear of a recession — will pass, pre-profit growth companies will come back into favour.

“But we’re a long way from that point. Consider sticking to the best for now.”

Defensive companies

It’s the same thinking that dictates investors should buy into companies that consumers will keep patronising through downturns.

“Those selling goods and services that we can’t do without — such as food, household products, utilities, insurance, and critical infrastructure,” said Stevenson.

“Cyclical stocks will have their day as we move through the recession but, again, we are not there yet.”

Diversify by sector and geography

Buying shares in different sectors, but also geographies, is important to protect one’s portfolio.

That’s because no person — not even the experts — can predict which markets will be favoured.

As an example, Stevenson referred to the outperformance of the FTSE 100 Index (FTSE: UKX) this year, which no one could have guessed in January.

“Likewise, preferring China and emerging markets is a minority view today,” he said.

“Investors in Shanghai and Shenzhen took their medicine through Beijing’s regulatory squeeze and the zero-COVID months. Things could look up from here.”

Don’t try to time the market

We hear this advice from experts all the time, but human nature dictates every investor is guilty of trying.

“You probably won’t catch the bottom, just as you probably missed the top at the start of the year.”

Keep the bear out of your mind

It is not uncommon for investors to go into their shells when turbulence hits the markets.

But rationally, it is the best time to buy. Everything’s on sale.

“Most importantly, don’t become more bearish as the market falls,” said Stevenson.

“It’s human nature to do so. Resist it.”

Consider bonds to counterbalance shares

If a recession arrives, central banks will stop hiking interest rates.

This means the current yields on bonds may not last for too long.

“Government bonds yielding more than 3% will seem rather interesting if interest rates head lower once more,” said Stevenson.

“Consider locking in some of that yield now.”

The post 6 ways to protect your ASX shares against recession appeared first on The Motley Fool Australia.

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More reading

• Here are 2 ASX dividend shares that brokers rate as buys
• Why did the BrainChip Holdings share price leap 14% on Monday?
• Broker names 2 ASX growth shares to buy now
• ‘Not bricks and mortar’: The real value in ANZ acquiring Suncorp’s banking operations
• Flight Centre share price leaps as ‘revenge travel’ takes off

Motley Fool contributor Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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